Customer, Supplier and Product Concentration

3 Months Ended

Mar. 31, 2017

Customer, Supplier and Product Concentration

Customer Concentrations

A significant percentage of the Company’s sales are to three wholesale drug distributors: AmerisourceBergen Corporation; Cardinal Health, Inc. and McKesson Corporation. These three wholesalers (the “Big 3 Wholesalers”) are all distributors of the Company’s products, as well as suppliers of a broad range of health care products.

The following table sets forth the percentage of the Company’s gross and net sales for the three month periods ended March 31, 2017 and 2016, and gross accounts receivable as of March 31, 2017 and December 31, 2016, attributable to the Big 3 Wholesalers:



	Three Months Ended March 31,
Big 3 Wholesalers combined:	2017	2016
Percentage of gross sales	79%	76%
Percentage of net revenues	64%	62%



	March 31, 2017	December 31, 2016
Percentage of gross trade accounts receivable	83%	84%

If sales to any of the Big 3 Wholesalers were to diminish or cease, the Company believes that the end users of its products would have little difficulty obtaining the Company’s products either directly from the Company or from another distributor.

No other customers accounted for more than 10% of gross sales, net revenues or gross trade receivables for the indicated dates and periods.

Supplier Concentrations

The Company requires a supply of quality raw materials and components to manufacture and package pharmaceutical products for its own use and for third parties with which it has contracted. The principal components of the Company’s products are active and inactive pharmaceutical ingredients and certain packaging materials. Certain of these ingredients and components are available from only a single source and, in the case of certain of the Company’s abbreviated new drug applications and new drug applications, only one supplier of raw materials has been identified. Because FDA approval of drugs requires manufacturers to specify their proposed suppliers of active ingredients and certain packaging materials in their applications, FDA approval of any new supplier would be required if active ingredients or such packaging materials were no longer available from the specified supplier. The qualification of a new supplier could delay the Company’s development and marketing efforts. In addition, certain of the pharmaceutical products marketed by the Company are manufactured by a partnered third party manufacturer, which serves as the Company’s sole source of that finished product. If for any reason the Company is unable to obtain sufficient quantities of any of the raw materials or components required to produce and package its products, it may not be able to manufacture its products as planned, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Likewise, if the Company’s manufacturing partners experience any similar difficulties in obtaining raw materials or in manufacturing the finished product, the Company’s results of operations would be negatively impacted.

No individual supplier represented 10% or more of the Company’s purchases in either of the three month periods ended March 31, 2017 or 2016.

Product Concentrations

In the three month periods ended March 31, 2017 and 2016, one Prescription Pharmaceutical product represented approximately 19% and 18%, respectively of the Company’s total net sales revenue. The Company attempts to minimize the risk associated with product concentrations by continuing to acquire and develop new products to add to its existing portfolio.